May 24, 2018 / 3:19 PM / 5 months ago

UPDATE 1-Scrapped N.Korea summit could raise U.S. uncertainty -Fed official

(Adds comments, context on trade, economy)

By Jonathan Spicer

May 24 (Reuters) - President Donald Trump’s decision to cancel a planned summit with North Korea’s leader is surprising and could raise more questions for U.S. businesses already uncertain about the direction of White House policy, a top U.S. central banker said on Thursday.

“It’s a downside risk,” Atlanta Federal Reserve President Raphael Bostic said on CNBC of Trump’s decision, shortly after the White House announced it.

“It will have implications from a certainty-uncertainty perspective,” he added. “There is just a lot that the business leaders that I talk to don’t know about where policy is going to be and where it is going to land. And I think this has the potential to add to that, in that these geopolitical risks really do have implications for how business will take place.”

In a letter to Kim Jong Un, Trump called off a planned June meeting on denuclearization due to “the tremendous anger and open hostility” in a recent statement by the North Korean leader. U.S. stocks and Treasury yields fell in response.

The Fed aims to continue gradually raising interest rates in the face of low unemployment and a boost from tax cuts and government spending. Yet the White House’s protectionist trade policies and its potential to stall robust economic growth have raised concerns among central bankers.

Employers are reluctant to make big investments that could boost productivity and growth if they don’t know the rules, said Bostic, who has a vote on rates this year under a rotation. “This has real implications ... for the likelihood that we are going to see a quick movement to a new trajectory,” he said of economic growth.

“I think it’s going to be a surprise to everybody. It was a surprise to me - I didn’t know that this was even a possibility,” he said of the canceled summit. “With the uncertainty now, we are at a fork in the road and there are multiple ways that you can go.” (Reporting by Jonathan Spicer Editing by Chizu Nomiyama and Bernadette Baum)

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